Government to end Help to Buy mortgage guarantee scheme
The mortgage guarantee part of the scheme will stop at the end of the year but other parts of Help to Buy will continue
The Government is pulling its Help to Buy mortgage guarantee scheme designed to help first-time buyers get on the property ladder.
In a letter to the Bank of England the Chancellor, Phillip Hammond, said that it was no longer needed and it would close at the end of the year.
He added that over 30 lenders now offer 90-95 per cent loans outside of the scheme.
Other parts of Help to Buy, the equity loan and the ISA bank account, will continue.
The mortgage guarantee scheme, which is part of the wider Help to Buy policy, is controversial because it allows buyers to purchase a house with just a 5 per cent deposit.
Some experts feared that this would encourage a housing bubble, where demand for housing was boosted without having enough supply.
Before the financial crisis struck in 2008 there were more than 800 different 95 per cent mortgages available to first-time buyers.
However, the majority of these disappeared as many lenders didn't want to risk giving cash to people who might not be able to keep up with repayments.
To qualify for the scheme you need to have between 5 and 20 per cent deposit.
The value of the home must be £600,000 or less and you must past credit tests by your lender.
Over 86,000 households have used the mortgage guarantee scheme since it launched in 2013.
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The Bank of England’s Financial Policy Committee said earlier this month that the policy was not needed. It said that the scheme had not driven up prices, even on homes that the scheme was used to buy.
The Chancellor wrote to Mark Carney, the Governor of the Bank of England, and said: "This reflects the fact that the scheme was introduced with a specific purpose that has now been successfully achieved and, as such, I can confirm that it will close to new loans at the end of 2016 as planned.
"It is important to note that the end of this particular scheme does not diminish in anyway the government's commitment to supporting those looking to get on the housing ladder, including through the Help to Buy: ISA and Help to Buy: Equity Loan schemes."
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